Business Segments

9 Months Ended

Sep. 30, 2020

Business Segments [Abstract]

Business Segments

Note 10.  Business Segments and Related Information

Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.

Segment Gross Operating Margin

We evaluate segment performance based on our financial measure of gross operating margin.  Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges.  Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests. Our calculation of gross operating margin may or may not be comparable to similarly titled measures used by other companies.

The following table presents our measurement of total segment gross operating margin for the periods presented.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Operating income	$	1,382.5		$	1,474.2		$	4,326.9		$	4,660.7
Adjustments to reconcile operating income to total segment gross operating margin    (addition or subtraction indicated by sign):
Depreciation, amortization and accretion expense in operating costs and expenses		484.2			467.1			1,461.3			1,380.8
Asset impairment and related charges in operating costs and expenses		77.0			39.4			90.4			51.2
Net gains attributable to asset sales in operating costs and expenses		(0.6	)		(0.1	)		(2.1	)		(2.6	)
General and administrative costs		50.3			55.5			162.8			160.2
Non-refundable payments received from shippers attributable to make-up rights (1)		49.3			20.8			79.1			34.3
Subsequent recognition of revenues attributable to make-up rights (2)		(9.4	)		(5.5	)		(25.0	)		(18.6	)
Total segment gross operating margin	$	2,033.3		$	2,051.4		$	6,093.4		$	6,266.0

(1)	Since make-up rights entail a future performance obligation by the pipeline to the shipper, these receipts are recorded as deferred revenue for GAAP purposes; however, these receipts are included in gross operating margin in the period of receipt since they are nonrefundable to the shipper.
(2)	As deferred revenues attributable to make-up rights are subsequently recognized as revenue under GAAP, gross operating margin must be adjusted to remove such amounts to prevent duplication since the associated non-refundable payments were previously included in gross operating margin.

Gross operating margin by segment is calculated by subtracting segment operating costs and expenses from segment revenues, with both segment totals reflecting the adjustments noted in the preceding table, as applicable, and before the elimination of intercompany transactions.  The following table presents gross operating margin by segment for the periods indicated:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Gross operating margin by segment:
NGL Pipelines & Services	$	1,028.1	$	1,008.3	$	3,038.2	$	2,933.8
Crude Oil Pipelines & Services		481.8		496.2		1,569.1		1,671.7
Natural Gas Pipelines & Services		208.4		258.5		701.1		824.6
Petrochemical & Refined Products Services		315.0		288.4		785.0		835.9
Total segment gross operating margin	$	2,033.3	$	2,051.4	$	6,093.4	$	6,266.0

The following table summarizes the non-cash mark-to-market gains (losses) for the periods indicated:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020		2019
Mark-to-market gains (losses) in gross operating margin:
NGL Pipelines & Services	$	(12.0	)	$	(0.7	)	$	11.4	$	(0.1	)
Crude Oil Pipelines & Services		10.1			9.8			28.9		95.0
Natural Gas Pipelines & Services		(14.8	)		1.3			10.0		1.3
Petrochemical & Refined Products Services		(21.0	)		(1.3	)		3.4		(3.3	)
Total mark-to-market impact on gross operating margin		(37.7	)		9.1			53.7		92.9
Mark-to-market loss in interest expense		–			(94.9	)		–		(94.9	)
Total	$	(37.7	)	$	(85.8	)	$	53.7	$	(2.0	)

For information regarding our hedging activities, see Note 14.

Summarized Segment Financial Information

Information by business segment, together with reconciliations to amounts presented on our Unaudited Condensed Statements of Consolidated Operations, is presented in the following table:

	Reportable Business Segments
	NGL Pipelines & Services		Crude Oil Pipelines & Services		Natural Gas Pipelines & Services		Petrochemical & Refined Products Services			Adjustments and Eliminations			Consolidated Total
Revenues from third parties:
Three months ended September 30, 2020	$	2,612.4	$	1,518.0	$	604.6	$	2,179.5		$	–		$	6,914.5
Three months ended September 30, 2019		3,250.1		2,467.9		712.3		1,518.2			–			7,948.5
Nine months ended September 30, 2020		8,053.4		5,007.0		1,855.2		5,210.7			–			20,126.3
Nine months ended September 30, 2019		9,843.9		7,916.5		2,451.6		4,518.2			–			24,730.2
Revenues from related parties:
Three months ended September 30, 2020		1.6		3.6		2.3		–			–			7.5
Three months ended September 30, 2019		2.0		10.4		3.2		–			–			15.6
Nine months ended September 30, 2020		5.0		16.7		7.5		–			–			29.2
Nine months ended September 30, 2019		7.3		35.7		10.7		–			–			53.7
Intersegment and intrasegment revenues:
Three months ended September 30, 2020		7,098.2		6,422.5		117.0		1,297.8			(14,935.5	)		–
Three months ended September 30, 2019		4,729.3		9,479.7		141.7		558.1			(14,908.8	)		–
Nine months ended September 30, 2020		18,826.6		18,302.7		325.0		2,815.6			(40,269.9	)		–
Nine months ended September 30, 2019		14,715.5		26,818.0		500.2		1,890.4			(43,924.1	)		–
Total revenues:
Three months ended September 30, 2020		9,712.2		7,944.1		723.9		3,477.3			(14,935.5	)		6,922.0
Three months ended September 30, 2019		7,981.4		11,958.0		857.2		2,076.3			(14,908.8	)		7,964.1
Nine months ended September 30, 2020		26,885.0		23,326.4		2,187.7		8,026.3			(40,269.9	)		20,155.5
Nine months ended September 30, 2019		24,566.7		34,770.2		2,962.5		6,408.6			(43,924.1	)		24,783.9
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2020		29.3		51.8		1.4		(0.5	)		–			82.0
Three months ended September 30, 2019		25.9		113.2		1.6		(1.4	)		–			139.3
Nine months ended September 30, 2020		90.8		243.2		4.3		(2.2	)		–			336.1
Nine months ended September 30, 2019		82.7		348.8		4.9		(5.1	)		–			431.3

Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates.  Our consolidated revenues reflect the elimination of intercompany transactions.  Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.

Information by business segment, together with reconciliations to our Unaudited Condensed Consolidated Balance Sheet totals, is presented in the following table:

	Reportable Business Segments
	NGL Pipelines & Services		Crude Oil Pipelines & Services		Natural Gas Pipelines & Services		Petrochemical & Refined Products Services		Adjustments and Eliminations		Consolidated Total
Property, plant and equipment, net: (see Note 4)
At September 30, 2020	$	17,309.6	$	6,503.6	$	8,383.0	$	7,695.0	$	2,468.9	$	42,360.1
At December 31, 2019		16,652.1		6,324.4		8,432.5		7,553.2		2,641.2		41,603.4
Investments in unconsolidated affiliates: (see Note 5)
At September 30, 2020		676.4		1,774.8		29.9		4.3		–		2,485.4
At December 31, 2019		703.8		1,866.5		27.3		2.6		–		2,600.2
Intangible assets, net: (see Note 6)
At September 30, 2020		341.2		1,952.4		915.1		139.9		–		3,348.6
At December 31, 2019		360.2		2,001.9		941.2		145.7		–		3,449.0
Goodwill: (see Note 6)
At September 30, 2020		2,651.7		1,841.0		296.3		956.2		–		5,745.2
At December 31, 2019		2,651.7		1,841.0		296.3		956.2		–		5,745.2
Segment assets:
At September 30, 2020		20,978.9		12,071.8		9,624.3		8,795.4		2,468.9		53,939.3
At December 31, 2019		20,367.8		12,033.8		9,697.3		8,657.7		2,641.2		53,397.8

Supplemental Revenue and Expense Information

The following table presents additional information regarding our consolidated revenues and costs and expenses for the periods indicated:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Consolidated revenues:
NGL Pipelines & Services	$	2,614.0		$	3,252.1		$	8,058.4		$	9,851.2
Crude Oil Pipelines & Services		1,521.6			2,478.3			5,023.7			7,952.2
Natural Gas Pipelines & Services		606.9			715.5			1,862.7			2,462.3
Petrochemical & Refined Products Services		2,179.5			1,518.2			5,210.7			4,518.2
Total consolidated revenues	$	6,922.0		$	7,964.1		$	20,155.5		$	24,783.9
Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	4,313.7		$	5,276.5		$	12,331.9		$	16,721.5
Other operating costs and expenses (1)		696.9			790.8			2,120.4			2,243.4
Depreciation, amortization and accretion		484.2			467.1			1,461.3			1,380.8
Asset impairment and related charges		77.0			39.4			90.4			51.2
Net gains attributable to asset sales		(0.6	)		(0.1	)		(2.1	)		(2.6	)
General and administrative costs		50.3			55.5			162.8			160.2
Total consolidated costs and expenses	$	5,621.5		$	6,629.2		$	16,164.7		$	20,554.5

(1) Represents the cost of operating our plants, pipelines and other fixed assets excluding: depreciation, amortization and accretion charges; asset impairment and related charges; and net losses (or gains) attributable to asset sales.

Fluctuations in our product sales revenues and related cost of sales amounts are explained in part by changes in energy commodity prices.  In general, lower energy commodity prices result in a decrease in our revenues attributable to product sales; however, these lower commodity prices also decrease the associated cost of sales as purchase costs are lower.  The same type of correlation would be true in the case of higher energy commodity sales prices and purchase costs.